COWN (2019 - Q3)

Good morning, thank you for joining Cowen’s conference call to discuss the results for the third quarter of 2019. By now, you should have received a copy of the company’s earnings release, which can be accessed at www.cowen.com.Before we begin, the company has asked me to remind you that some of the statements and comments made on today’s call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and uncertainties described in the company’s earnings release, and other filings with the SEC. Cowen has no obligation to update the information presented on the call. A more complete description of these and other risks and uncertainties and assumptions is included in the company’s filings with the SEC, which are available on the company’s website.Also on today’s call, our speakers will reference certain non-GAAP financial measures, which the company believes will provide useful information for investors. Reconciliation of those measures to GAAP is consistent with the company’s reconciliation as presented in today’s earnings release.Now, I would like to turn the call over to Mr. Jeffrey Solomon, Chairman and Chief Executive Officer. Jeffrey

Thank you, operator. Good morning everyone and welcome to Cowen’s third quarter 2019 conference call. This is Jeff Solomon. And joining me today on the call is our CFO, Steve Lasota.As a reminder, we made quarterly financial supplement available in the Investor Relations section of our website. We encourage you to review it in conjunction with our earnings release. This supplement presents our business in two segments; our Operating Company or Op Co and our non-core Asset Company or Asset Co. This format aims to provide insight into the profitability of our core business and the value of the legacy investments on our balance sheet. This supplement also highlights the progress we’re making towards achieving our long-term objective of mid-teens, average return on common equity on a sustainable basis over the business cycle.So, turning to our results. The third quarter of 2019 marked another quarter of profitability on both a GAAP and an economic income basis despite challenging market conditions for investment banking. We also made significant process – progress in repositioning Cowen Investment Management. During the quarter, we launched our new Cowen’s sustainable investment strategy, grew our assets under management and Cowen Healthcare Investments and completed the sale of our interest in the RCG Longview real estate strategy.In the third quarter, we took advantage of an opportunity to increase our share repurchases during the open trading window, and as we announced today we bought back 663,000 shares of our common stock for $10.4 million. The Board of Directors has authorized an increase in our share repurchase program and the amount remaining for buybacks is currently $25 million. We also continue to make strategic investments in the business including upgrading our clearing capabilities and making targeted hires across the firm. These investments impacts our comp and non-comp expenses in the near-term, but the additional spending is necessary to further increase our revenue diversity and position us for future revenue growth.Taking a look at the performance of our operating businesses in banking and capital markets, investment banking revenue in the third quarter was down 10% year-over-year, impacted by an industry wide slowdown in deal activity in July and August. Equity capital markets comprised 68% of our banking revenue, which is down from 71% in the third quarter of 2018. We booked 30 capital markets transactions during the quarter and we served as a book runner on 15 of them. Healthcare continues to be our strongest sector. However, industry diversification continues, non-healthcare investment banking revenue represented 55% of total investment banking revenue in the third quarter, up from 43% in the third quarter of 2018.We continue to selectively build out our sector capability organically. Recently, adding two Managing Directors in our Capital Markets Group, including one focus on private placement markets as well as an MD focus on industrial technology. While M&A revenues were down 23% year-over-year, they were actually up 43% sequentially. Quarton continues to gain momentum as the integration progresses nicely and revenues were up significantly compared to this second quarter. Overall, the pipeline for advisory deals remains solid so far in the fourth quarter. I should add however that the macro environment is increasingly a factor in the timing of future deals and there our ability to convert that backlog. If high levels of volatility and uncertainty possessed, this could obviously impact the conversion rate of the deal pipeline.Now, turning to our Markets division. Markets revenue, which includes brokerage, securities, financing and other revenues was up 4% year-over-year. Highlights during the quarter included strength in cross asset trading, special situations, securities, finance and derivatives. Revenue for our Institutional Service segment, which includes prime services, clearing, commission management and commission recapture, was up 13%. We continue to gain industry recognition for our service offerings, including being named the best Outsourced Trading Solution in a poll at the 2019 Hedgeweek Awards. We were also named the Best Boutique Prime Broker at the HFM US Hedge Fund Services Awards.In addition, our commission management platform, Westminster was highlighted as a quality leader in Granite Associates [ph], benchmark equity commission management survey. And while we’re grateful for the recognition, we’re working to make our offerings even more valuable to our clients by adding complimentary capabilities. We are building out a full service ETF Trading and market making desk. And during the quarter, we expanded our European execution desk with the addition of seven experienced sales trading hires from a European Bank that exited equity trading. We expect the competitive landscape to continue shifting as other large banks rethink their market position and equities. And while it is still early days, we are pleased with the increased level of client engagement around these new additions to our European team. Our Markets division continues to perform strongly overall and we believe we are well positioned to gain additional share.In research, we expanded our coverage universe to just over 800 stocks, which is up 6% from the third of 2018 including initiations on the human capital management sector. We continue to have strong client management with increased attendance and recent conferences and a jump of more than 50% in the number of corporates, participating in Cowen non-deal road shows.Moving to Investment Management. As a reminder, we are concentrating on growing private equity style investment vehicles and are targeting our strategies in core areas of expertise at our firm or what we call Cowen DNA. This is an important part of our simpler, fewer, deeper philosophy. As a result of these efforts, we’re seeing strong traction in Cowen branded strategies with approximately $550 million in assets raised during the third quarter. We launched a new sustainable investing strategy with just over $200 million in commitments and this strategy is focused on the key investment themes of renewables in storage, clean transportation, sustainable food production, and industrial efficiency. We also raised nearly $350 million in additional capital in our healthcare investment strategies, and had two significant portfolio events. The IPO of Livongo in July and the sale of Semma Therapeutics.Our healthcare royalty strategies completed two investments representing approximately $95 million in capital. And with these two investments, HSR has now finished investing its third fund and currently, has over a $1 billion in capital to invest in royalties in debt like structures of commercial or near commercial stage healthcare products and companies.Our merger arbitrage strategy was recognized as a best managed – best Arbitrage Manager Hedge Fund at the 2019 Hedgeweek U.S. Awards. The strategy is generating positive returns for the quarter and is outperforming the HFRX Merger Arb Index year-to-date for 2019. And our activist fund was essentially flat for the quarter that remains positive year-to-date. As I mentioned earlier, we completed the sale of our interest in RCG Longview management, the management company for the legacy real estate funds in which we were invested. We also completed a transaction to sell some of the real estate assets on our balance sheet.These transactions had a little impact on our results for the third quarter that raised approximately $8.6 million in cash. We’ll be working to exit other legacy real estate investments in our asset company over the coming quarters. Regarding Asset Co, as a reminder, we are committed to monetizing these legacy investments when we can. We will consider both price and timing as factors when looking to divest these holdings.And now, before we answer your questions, I will turn the call over to Steve Lasota, for a brief review of our financials. Steve?

Thanks, Jeff. For the third quarter of 2019, we reported GAAP net income attributable to common shareholders of $2.1 million, a decrease of $11.7 million from the prior year period. GAAP revenue was up 14% year-over-year to $252 million from $221 million in the prior year period, due to increased securities finance activity.In the third quarter of 2019, GAAP comp and benefit expenses were $114.2 million. Non-comp expenses for the third quarter of 2019 were $94.6 million and D&A was $5.1 million. Our income from gains on investments was $32.3 million. Income tax expense was $1.4 million and non-controlling interest expense was $8.9 million.Now, turning to our non-GAAP financial measures, which we refer to as economic income. As a reminder of effective starting with the second quarter of 2019, the company now has the following business segments: the Operating Company or Op Co consists of four divisions. Cowen Investment Management, Investment Banking, Markets and Research; the Asset Co segment consists of certain of our private investments, real estate holdings and other legacy multistrategy funds.As a reminder, we use economic income to measure our performance and to make certain operating decisions. In general, economic income is a pretax measure that eliminates the impact of consolidation for our consolidated funds and excludes goodwill and intangible impairment, certain another transaction related adjustments or reorganization expenses and certain costs associated with debt. The economic income revenues also includes incentive income, earned during the period when incentive fees are not yet crystallized with GAAP reporting as well as investment banking retainer fees collectable during the period that would otherwise be deferred for GAAP reporting.The remainder of my remarks will be based on these non-GAAP financial measures. We reported economic income of $5.5 million for the third quarter of 2019 compared to $21 million in the prior year period. Third quarter economic operating income, which is an economic income before depreciation and amortization expenses was $10.6 million, compared to $23.9 million in the third quarter of 2018.The economic income revenue decreased 4% year-over-year to $217.1 million. For the quarter, investment banking revenue was down 10% year-over-year to $70 million. Q3 brokerage revenue was up 4% year-over-year to $105.9 million. Management fees for the quarter were $10.9 million, compared to $12.4 million from the prior-year period. Incentive income was $14.4 million in the third quarter, up from $6.9 million in Q3 of 2018 due in part to higher performance fees from our healthcare investment strategy. Investment income for the quarter was $16.1 million, down from $27.7 million in the prior-year period due to the $23 million impact of Tilray investment valuation in the third quarter of 2018. And finally, other revenue was $0.1 million in the third quarter, unchanged from a year ago.Turning to our expenses. Comp and benefit expense for the quarter was $116.5 million, compared to $126.7 million in the prior-year period. Our comp-to-revenue ratio dropped year-over-year from 56% to 53.7% of economic income revenue. Please note that although our comp-to-revenue ratio dropped this quarter, our non-controlling interest expense rose to $6.8 million, up from $2.1 million a year ago, due in part to higher incentive fees related to improved investment performance and some Cowen’s investment strategies.Going forward, we would expect our comp ratio to move back towards our target range of 55% to 56% although it could be higher in some quarters depending on the timing of hires and fluctuations in revenues. Fixed non-comp expenses totaled $37.1 million in the third quarter, up from $34.7 million in the prior year period. Variable non-comp expenses in the third quarter of 2019 were $37.3 million, compared to $30.7 million in the third quarter of 2018.The increase in non-comps reflects increased business development expenses and fixed expenses from new hires and increased legal and headhunting fees as well as the impact of the Quarton acquisition. It also reflects a one-time benefit of $2 million in the third quarter of 2018 from credits for clearing and trading activity fees. Depreciation and amortization expenses were $5.1 million, compared to $2.9 million in the third quarter of 2018 due to the Quarton acquisition.Looking at our business segments. As of September 30, 2019 the company had invested capital and operating company totaling $571 million. Op Co had total revenues of $216.7 million and economic income of $8.3 million in the third quarter of 2019. As of September 30, 2019, the company had invested capital in Asset Co totaling $145 million. Asset Co had total revenues of $0.4 million and an economic loss of $2.7 million in the third quarter.Turning to our equity. Common equity, which is stockholders’ equity, less preferred equity was $715.7 million, compared to $693.1 million as of December 31 last year. Common book value per share, which is common equity divided by total shares outstanding increased slightly to $24.67 as of September 30 compared to $24.37 as of December 31.Return on common equity was an annualized 5.9% in the third quarter of 2019, down from 13.7% for 3Q 2018. In the financial supplement, we also provide a segment breakout of return on common equity for the third quarter of 2019. Op Co had ROCE of 8%; in contrast, Asset Co had ROCE of negative 23.9%.With that, I’ll turn the call back over to Jeff.

Thanks, Steve. So to sum it up, we demonstrated strong momentum in our Investment Management segment in the third quarter and maintained profitability overall despite weaker market conditions in investment banking even as we continue to invest in our capabilities. This result demonstrates the increasing revenue diversity of our business.With that, I will open it up for questions. Operator?

Thank you. [Operator Instructions] And our first question comes from Sumeet Mody with Sandler O’Neill. Your line is now open.

Thanks. Good morning, guys.

Hi, Sumeet.

Hi, Sumeet.

Hey, just wanted to touch on Quarton, first to start off, I appreciate the color and the prepared remarks, but how is the product – how is the progress tracked versus the firm’s overall expectations through the first three quarters and maybe, just a little more color on that pipeline, is it bit of a timing issue there in the third, are we going to see a little bit more coming into the fourth just from the timing of closings and maybe, just a little more color around the pipeline would be helpful.

So, I’ll just say the pipeline – I’ll start by saying the pipeline is actually grown significantly all year long. And it’s the biggest, it’s been since the acquisition, which is ultimately one of the best indicators that, what – the business works and it works as we expected it to do. I think the challenge that we’re seeing sometimes in particular in Europe is that there’s a little bit more uncertainty certainly around Brexit and things like you know the economic challenges I think in Europe. And so we’re seeing slower conversion rates on some of that backlog, but as it relates to the overall progress it is on track. I think we’re seeing the conversion rates continue to pick up in the third quarter. We expect that to continue in the fourth quarter, which is basically what we had projected to have happened, when we did the acquisition.So, all in all, it’s well within the expectations of Cowen that we had set forth and we budgeted for this year and we’re very pleased with it. I also say it’s early days in terms of the integration, but I continue to be very encouraged by the collaboration of our collective teams and the integration is going well. And I just think, long-term that’s what you look for when you do these kinds of things. And so I know that’s a bit of a soft comment, but when I see our teams joint pitching and over time, there doesn’t seem to be any difference between who came from where? Those are great signs for me that that we did the right thing culturally in long-term. That’s really what’s going drive the value of the business.

Thanks. That’s helpful. And then just one on the capital market side, we’ve seen some of the bulge bracket piers outperform on this, on the debt underwriting side this quarter from similar fee rates – excuse me, lower interest rates in the third, how has that mix for you guys in the quarter? I mean, is DCM becoming more kind of prevalent and now that interest rates are lowering a little bit or is that still kind of too small to tell?

I would say we’re not meaningful enough yet in the debt capital markets to be affected by the overall market trends. It’s good news and bad news that we repositioned that business at the beginning of the year to really refocus our efforts on debt placement and we’re seeing that traction. When we pitch companies about their financing options, we’d like to be able to provide full solutions. And so sometimes those solutions turn out to be equity. Sometimes, it’s hybrid and convertible. Sometimes, it has debt placement. I just think when we – the team that we’ve brought on is doing an amazing job therein, just about every capital markets and financing pitch; they’re in every one of them. And so you’re seeing we’re starting to get some traction around that.I would certainly say increasingly with the Quarton acquisition for lower middle market and for middle market sponsors, that’s an area, where we’re seeing significant traction, where we didn’t use to have traction at all really in any meaningful way. And so I’m encouraged by what’s happening in that area. And in particular, I think it’s helping us to win business across the entire capital markets landscape, which is sometimes that translates into equity or convertibles, or structured credit. I mean it’s – it is a part of the long-term solution that we provide to clients and I’m very happy with it.

All right, great. I’ll hop back in the queue. Thanks for taking my questions.

Okay.

Thank you. And our next question comes from Chris Walsh with Buckingham Research. Your line is now open.

Hey, guys. Good morning.

Hi, Chris.

Good morning.

So, I just wanted to touch on the state of the IPO market. We’ve clearly seen deal activity slow in recent months from an industry standpoint and with ECM being such an important part of the overall franchise, can you just talk about how that’s impacted your ability to pull deals through the backlog from announcement to completion?

Yes, I mean, I don’t – I would say, we’re a little bit different than most other firms, we – in terms of our focus on particular in biotech, which really marches to the beat of its own drum. I would say that the challenges we’ve had in that market are more function in the fact that we just need company – companies to mature enough to actually get them public. and when I look at that space, the challenge for us really more there is a company formation and management teams getting them ready and getting them out. It’s actually the gating item there as opposed to whether or not there’s demand from the investor side. That’s actually one of the primary drivers for us. I look at and what we’ve done outside of biotech and say that we’ve actually booked run more deals outside of biotech in this year than in any other year.And that’s actually very encouraging to me, because it demonstrates that the muscle memory associated with doing IPOs is a really strong account. And so we’ve executed I think, pretty, pretty wonderfully. But the most of our ECM business is really follow-on business and there, if you look at the mix, companies are coming to market, particularly with our focus on biotech, biotech companies tend to raise money in multiple market environments. And that’s exactly what we said and exactly what we’re experiencing. Those companies when they decide to pull the trigger and do a financing, oftentimes they might be in the backlog for like a day and a half, it’s not even like when they make a decision or there’s a positive event and they want to raise capital, we have to be there for them all the time.And so when you look at our product mix, it’s actually less dependent on the IPO market and more dependent on when our clients need to raise money. And in difficult market conditions, they may wait a quarter or two, but invariably, they have to fund their business models until they come to market, when they need to come to market. And so for us that the primary driver is how many of our clients remain public and how often are they going to have to raise capital. And that puts a really strong floor under our ECM business, which I think is different frankly than most other firms on the street given our focus in the biotech space.

Great. Thanks, Jeff. And then just one other one on investment management. This morning’s release outlined your recent launch of the news sustainability strategy and Cowen Investment Management. And you indicated you raised $550 million in Cowen branded strategies during the quarter. Question is, what would you say your outlook for AUM growth moving forward is and should we expect to see modest growth looking ahead?

So, yes, it’s a great question. So, we had articulated the strategy that we’re going to pivot ourselves more to private equity style fundraising, because of the sustained – the sustainability and the consistency of management fees associated with that. And these are the – along with healthcare royalty partners, those three funds are going to make up the bulk of our AUM growth for the foreseeable future. We won’t – we won’t be always on raising them. The private equity rhythm is a little bit different, right? You raise, you invest, then you raise and you invest. And so I don’t think you’ll see that happen all the time, but one of the things I will say about the strategies certainly, the sustainability strategy, healthcare royalty strategy and the Cowen Healthcare Investments strategies, they’re all full fee paying.So, one of the things we’ve tried to focus on is capacity constraint products, because our goal is to optimize for, obviously returns. And these are funds that have capacity constraints around them. And as a result, we can charge higher management fees for those, because it’s hard to get – it’s hard to get them. The Cowen’s sustainable investments strategy, I think, it’s still open and we have an opportunity to increase the size of that and we’re an active dialogue. So, you could see – this is a first close, so you can see us increasing AUM over the next six to 12 months and as we have more meaningful dialogues with investors. And certainly, Cowen healthcare investments remains open that the 300 and change we raised in that fund, there’s still capacity in that fund for us to do a subsequent close. And I think you’ll see that happening. And I think Healthcare Royalty Partners will have its final close on its most recent fund at some point in the not too distant future.And so you’ll see some increase there. And then you’re going to see it kind of playing out for awhile as we get – as we get those funds invested. So, to me, it’s a – in different way of looking at our asset management business. Certainly, the departure of our – or the divestiture of our real estate business, makes it look like our headline AUM numbers have gone down, but that business wasn’t contributing meaningfully at all to the profitability or even the revenue line. And so what you’re seeing is a much more true picture of how we’re driving economics through that business. And I don’t want to overstate it. We’ve been cleaning up a lot of things in that business for the past two years. And this is really the first quarter where I feel like a lot of the investments we’ve made and the business we’ve made, it feels like a pivot and it feels like we’re in a position, where we’re adding AUM in strategies that are more Cowen DNA oriented, and that gives us a pretty good trajectory as we look forward.

Got it. Thanks, Jeff.

Great.

Thank you. [Operator Instructions] Our next question comes from Devin Ryan with JMP Securities. Your line is now open.

Great. Good morning, Jeff, Steve. How are you guys?

Good, Devin. how are you, buddy?

Doing well, doing well. So, first question, Jeff, you had mentioned in the prepared remarks that you’re seeing some of the large banks are examining their equity footprint, which we see as well. I just wanted to dig into that a bit more and really just how you see this playing out, how it might impact revenues may be up for grabs in brokerage and does the wallet shrink ratably as this clients just look to pay a little bit less. And really, also how does the retrenchment impact the outlook for equity underwriting opportunities?

Yes. So, let me take your first question. Oh, certainly. I think if you’re a casual participant in the global equities business, you have to be asking yourself, why am I doing this? I don’t – we’ve been saying this for years, like – and I think a lot of us, who have more clients industry for a long time, recognizes that there’s still overcapacity in this industry and the mediocrity that comes along with traditional equity execution, it still exists. It takes awhile for that to change. But I think the announcement from some of the European banks and some of the rumors we’re hearing suggests that we’re, we’re moving more quickly to have people get out of businesses, where they can’t be taught here. And we’ve been playing for this for a while. And you can see that, certainly with our moves whether it’s in our McLagan data or in other data that we look at in terms of volumes, even daily average advertised volume, Cowen is at the top of a lot of those rankings. And we’re absorbing that.So, I think we’re definitely benefiting from the fact that other banks are actually in the business. Certainly, with the team that we hired in Europe, that is a direct result of a European Bank exiting the space and that team being our very talented team. And us being able to bolt-on tactically in an area, where we just didn’t have a strong presence. We got our European equity execution presence through the Convergex acquisition and it’s really good. We just haven’t really been able to scale it until we can find the right talent. And so I mean, we had great talent at Cowen. It just wasn’t scaled to be fair. And the integration of the team that we had at Cowen and this new team has been great in the first month and changed since we’ve been together and clients recognize that. And I think increasingly in a post-MiFID II world, I’ve said this before, but it bears repeating. you need to be excellent in research. You need to be excellent in trading and you can’t be casual and either or you don’t get a wallet.And so I feel very, very good about what we’re doing there, because I can see it in the numbers every day and I hear it from clients every day that what we’re doing is differentiated and honestly they’re thankful. Now, what does that mean for their wallets overall? I don’t – we’re not building our business expecting the global equity wallet to increase. That’s not what’s going to happen here, but we’re building it to be able to take share from lesser competitors. That’s what we’ve been doing over the past six years with our algorithmic offering and a bunch of our offerings.I think we have a world-class product that is non-conflicted, that really speaks to the needs of the buy side. And as a result, we’re seeing that play through. And that’s really what I feel and we’re seeing it in the numbers. as it relates to the IPO market, can you just repeat the question for me? So that I make sure I answer it directly.

Sure, right. So it’s interconnected. Just trying to think about if you have layers pulling back in their equity trading capabilities or potentially research footprints, if you will. How do you see that if you believe that impacting the equity underwriting outlook as well?

Yes. I think the two are just connected. I really do. I think you can’t be in the equity distribution game unless you have an equity distribution platform. So, I think – and we know that IPOs and the IPO windows are sporadic. They know we’re not living in the 1990s, where they seem to be coming in bucketloads every week. That’s not the way it has been. And that’s not the way we anticipated being. And so you have to build a world-class secondary trading capability and a world-class research capability to maintain that engagement. And then when you have product to put through that pipeline, you put it through when it happens. We’re – one of the reasons we did the convergex acquisition and the reasons we’ve scaled that business needs to stand on its own if we have a soft patch in new equity underwritings and it does at the scale that we’re at. we’re in a much better shape than we were like seven years ago when we could – when it was – there were some days when you could feel the real slowdown and it would slow down increasingly at Cowen. And that’s we’re not experiencing that.Now, the flip side of that is when you have – when the markets are a little bit more quiet like they were in July and August, obviously, our volumes are down, but they’re down less than I would say a lot of our competitors. And so the business strategy that we pursued to be excellent in both research and excellent in sales and trading. That gets augmented when the pipeline for new issue is open. In particular, in the biotech, which is a big part of our business, we are increasingly leveraging off of the fact that we have book runner status. And that the – our ability to engage with our corporate clients and our investor clients, and be that valuable intermediary between the two is a real differentiator.And that’s why when our companies, when our corporate clients decide that they want to raise money, that’s why they come to us, because we’re in that dialogue every day, multiple times a day. And I would say if you’re – for some of the banks, who are not in the dialogue everyday with their equity distribution platforms, it is hard to wake up one day and start selling new issue. That’s to us, it may not appear obvious, but the fact that we are always on with our clients and engaged on a daily basis, multiple times a day is what makes us one of the best underwriters, because we’re just – we’re bringing that product as part of our regular dialogue as opposed to, hey, we have something special today that we haven’t really talked about in a long time. And that’s, I think, again, it speaks to the integration of the platform and why we’ve been able to be successful when so many others have not been.

Right. Right. Exactly. Now, I guess I asked the question from the angle that if people pull back in equity distribution or equity sales and trading, if you will. Ultimately, if you can research on a name from 10 to three that the remaining firms that are engaged with that corporate, may you have a better opportunity or better economics on the underwriting side. But yes, we can – we can move on.

But I think that’s true. I do think that’s true. I will say when you look at our market share outside of biotech and how we’ve increased and how we become more focused on doing book run deals outside of biotech as we built that out. And certainly, we’re leveraging that and I would say again, if you look at certain deals like we were on the Peloton IPO is a great example of a place, where we’re a book runner and we’re probably one of the only non-lending firms if not the only non-lending for on that cover. Okay. So why are we there? Because we’re excellent at research and excellent at trading and we can bring to bear a differentiated offering for that company relative to a lot of other players. And so your point is well taken and we’re seeing it, we’ll just – we’re not depending on – we’re not dependent on having all this happen all the time in order for our business model to be successful though of course, we would love to see that happen.

Got it. Okay. Thanks, Jeff, very helpful. And then we touched a lot on the biotech kind of contribution, but cannabis has obviously been a big focus in a really nice area of growth for the firm. Those stocks have been under pressure recently. So, I’m just curious how that’s affecting the intermediate term outlook for that, I guess, sector, if you will, within the banking business and if that’s having any effect on kind of the pipeline or expectations for revenues from that part of the business.

Yes, that’s a good question, Devin. So, we – it’s an emerging business and I would say that just like any emerging business, it goes through ups and downs. And certainly, the last quarter, in the last three months, has been a reevaluation of some fundamentals in that business. You’re kind to say it’s been actually a very difficult investment area for a lot of folks.We’re having much more holistic conversations with cannabis companies. And again, I want to reiterate most of the conversations that we’re having are outside the United States from a regulatory standpoint. And we understand that the dynamics of how you get from point A to point B in terms of the idea versus the execution. There’s some – some of the companies have had more challenges than others at being able to deliver on the promise of commercial success. And that happens I think in any emerging industry. This is an industry that is really less than in many as perspectives; it’s less than five years old. And a lot of the companies that we’re focusing on are building out their growing capabilities and their distribution capabilities and their commercial capabilities and some of them are stumbling on that. And as a result investors have gotten a little bit nervous, but I was sick about that space I think interesting is there doesn’t seem to be a depth yet in the U.S. capital markets.So, when you see other industries symbol on many instances – in many instances, people say, I didn’t like it at that valuation, but if it’s down 20% or 25%, I would be interested in owning it there. And I think one of the things we’re seeing with cannabis, and there’s usually a binary decision on the part of investors. Am I going to be involved in the industry or am I not going to be involved in the industry? And I think that element of it has kept certain players from entering, even though valuations are arguably way more attractive now than they were, three, six, nine months ago.That’s going to play out though over time. We believe and I think we’ve said it on previous calls and we certainly see it in our research. This is a very long game. Cannabis isn’t going away. In fact, arguably, given this is one of the challenges around the opioid epidemic cannabis from a medical standpoint, offers a very viable long-term solution for pain management. The market has to catch up to that. And when it does, the players in this space that we believe we’ve banked will benefit significantly. And it will look much more like a consumer product, a CPG company than it will like a new technology or an agro industrial company. And we continue to position ourselves to be the leader and being able to articulate why we think certain companies will perform and others won’t. And we’re in significant dialogues, not only on financings, but on M&A, and strategy and partnerships. And I look at that space over the next five years and say there are very few firms, who have the depth of knowledge and understanding and the network that we have and however that plays out we’re going to be in a position to capitalize on that. And that’s just really, what we need to do. Markets come; markets go, we need to make sure that we’re making investments in things that over the long-term will benefit our shareholders.

All right. Great color. Thanks very much, Jeff. I’ll leave it there.

Great.

Thank you. And I’m showing no further questions in the queue at this time. I’d like to turn the call back to Jeffrey Solomon for any closing remarks.

Well, thank you everybody for taking the time to fit in with us this morning. Before we sign off, I – obviously, I want to thank the team here at Cowen for all of the hard work and dedication. Results like these in challenging markets don’t come easy. But I continue to be inspired by our colleagues, who live our core values and vision, empathy, sustainability, and tenacious teamwork every day. And I’m very confident that our commitment will continue to deliver results for our clients, for our shareholders, and for ourselves over the long-term.Thank you all for joining us and we look forward to speaking with you again, on our next call in February. Have a good day.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.